Qantas Airways Ltd is scrapping its budget carrier Australian Airlines in July, and will focus on its key Qantas and low-cost Jetstar brands in local and international markets, chief executive Geoff Dixon announced yesterday.
Jetstar is Qantas' second budget offshoot and the company wants it to operate as its only low-cost carrier.
From November, Jetstar will begin flying international routes to Bangkok and Phuket in Thailand, Osaka in Japan, Vietnam's Ho Chi Minh City, Honolulu, and the Indonesian vacation island of Bali.
Cost structure
"Australian Airlines has done an outstanding job over the past few years, but we are determined to take full advantage of Jetstar's success, with its highly competitive cost structure and service standards," Dixon said in a statement.
"We are creating two distinct and viable flying businesses in what remains a very difficult operating environment of continuing record high fuel prices," Dixon later told reporters.
"Jetstar will be grown aggressively over the next three years while we continue to expand Qantas' international operations," he added.
Dixon said Australian Airlines began flying when SARS took hold in the region in 2003, and the airline never recovered from the associated downturn in international travel. There were 8,000 cases of the disease in 30 countries, about 800 of them fatal.
"We would have liked it to be more profitable," Dixon said.
He said 30-40 people would lose their jobs in the next few months with the loss of the airline while another 550 people would be recruited to staff the new Qantas and Jetstar services.
Restructuring ahead
Dixon also said Qantas did not foresee any major drop in the price of oil in the next two or three years so the airline would have to substantially restructure.
"Part of that major restructuring is the starting of Jetstar as an international operation," Dixon said.
Jetstar, which was set up to compete with rival budget airline Virgin Blue in May 2004, will offer two classes.
The airline will initially use six Airbus A330-200 aircraft before upgrading to 12 Boeing 787 aircraft, Dixon said.
"The network will ultimately provide more services to Asia and the Pacific before expanding with second stage flying to Europe and other destinations," Dixon said.
Jetstar will unveil fares and schedules for its international flights in June.
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